Banks can count on a fight over fees

At the end of every month, Julian Saliba, a self-employed builder in Melbourne, would tally up all the bank fees he’d paid for briefly overdrawing his account.

At $37 for each overdraw, it didn’t take much to be handing over $2000 a year in fees.

“That’s a nice holiday I could have been having on the banks," he says ruefully, adding that while he found the fees frustrating, he thought they were unavoidable seeing as all banks charged them.

“I’ve put up with it and thought this is the cost of doing business in Australia, unfortunately you have to pay bank fees."

But change is afoot.

Saliba has channelled his frustrations into becoming one of three lead plaintiffs in a class action launched this week against
Australia and New Zealand Banking Group
over the legality of “exception fees" – honour and dishonour fees on banks accounts and over-limit and late-payment fees on credit cards.

The case is bad news for the entire banking sector as it may reveal for the first time exactly how much it costs the banks to allow their customers to briefly overdraw their account or miss a credit card payment. In 2009, the revenue made from these fees was more than $1 billion, according to the Reserve Bank of Australia.

Related Quotes

Company Profile

ANZ customers pay $6 per day their account is overdrawn and
Commonwealth Bank of Australia
customers pay a flat fee of $10.

But both those banks still have high fees for missing credit card payments – $20 at ANZ and $25 at CBA. Consumer group Choice has spent five years campaigning against bank fees. Spokesman Christopher Zinn says the new legislation has finally forced banks to move, and hopefully the class action will make the fees fall further.

“We are not against fees per se as long as they are transparent, avoidable and fair, and they do not proliferate like microbes in a petri dish," he says.

The class action has been brought by Maurice Blackburn, which will argue the fees are illegal because they are exorbitant compared with a bank’s actual costs and are hence an illegal penalty under contract law.

Litigation funder
IMF
is paying Maurice Blackburn’s fees and will collect 25 per cent of any compensation or settlement money.

If the case against ANZ is successful, similar class actions will be brought against 11 other banks, seeking compensation for their customers – unless the banks decide to settle.

To date, 140,000 individuals and businesses holding 220,000 bank accounts and credit cards have started the sign-up process. That includes 10,000 who signed up this past week. As Australia’s largest class action, the case is providing publicity for organisations like Choice in their campaign to get bank fees lowered. Choice is in the midst of forming a coalition with other organisations, including political outfit GetUp!, to take on the financial services sector.

“We’re going to be pushing for the concept of financial integrity and financial responsibility from institutions, mainly the banks but not exclusively the banks, because we believe they are not always behaving in a way that’s professional in terms of working responsibly and ethically and in terms of what’s in the interest of the boarder community and country," Zinn says.